Godavari Polymers Pvt. Ltd. Instrument Amount Ratings Action (Rs. Crore) September 2014 Fund based Limits 20.57 [ICRA]BB+(stable) re-affirmed Fund based Limits 28.23 [ICRA]BB+(stable) assigned Non-Fund based Limits 28.00 [ICRA]A4+ re-affirmed Non-Fund based Limits 22.00 [ICRA]A4+ assigned ICRA has re-affirmed [ICRA]BB+* (pronounced ICRA double B plus) rating for the Rs.20.57 crore † long term fund based facilities and [ICRA]A4+ (pronounced ICRA A four plus) for the Rs.28.00 crore short term non-fund based facilities of Godavari Polymers Private Limited (GPPL). ICRA has assigned a long term rating of ICRA]BB+ (pronounced ICRA double B plus) to the Rs.28.23 crore fund based facilities and a short term rating of [ICRA]A4+ (pronounced ICRA A four plus) to the Rs.22 crore nonfund based facilities of GPPL. The outlook on the long-term rating is Stable. ICRA has also revoked the suspension of GPPL’s ratings. The reaffirmation of ratings continues to draw comfort from GPPL’s presence as a manufacturer of high quality High Density Polyethylene (HDPE) pipes, sprinklers and drip irrigation system with an established brand name, which is being distributed through a dealer network of over 1500 covering six states. The operating income of the company witnessed a healthy growth at a CAGR of 24% between FY10 and FY14 primarily driven by healthy demand in micro irrigation systems (MIS). The demand outlook for the GPPL’s products is expected to be favourable due to the growing popularity of sprinkler and drip irrigation systems within the farming community as a result of the subsidy provided by the government. The ratings, however are constrained due to continuous deterioration in the operating margin which has come down from 10.85% in FY11 to 6.70% in FY14 mainly on account of increased raw material costs which could not be passed on to the customers entirely coupled with higher power costs. The company is exposed to geographical concentration risks as 60% of the revenue during FY14 was derived from erstwhile Andhra Pradesh. The ratings also factor in the high working capital requirements of the company primarily on account of stretched receivables from the government resulting in high average CC utilization of 98% during the past 12 months. The company has capex plans in FY15 (60% to be funded though term loans) which might stretch its capital structure; production and sales for the new unit might remain a challenge in the initial years. The rating is also constrained on account of uncertainty of government policies in Andhra Pradesh and Telangana which are the major contributors to GPPL’s revenue and might hamper the sales in future years as witnessed during FY14. Going forward, ability of the company to timely commence operations of the new unit and successfully ramp up of production while managing its working capital requirements will remain key rating sensitivities. * For complete rating scale and definitions please refer to ICRA's website www.icra.in or other ICRA Rating Publications † 100 lakh = 1 crore = 10 million Company Profile Godavari Polymers Pvt. Ltd. was incorporated in August 1990 as a private limited company and is into manufacturing of HDPE pipes, drip and sprinkler irrigation systems; the manufacturing unit is located in IDA Cherlapally, Ranga Reddy Dist, Telangana. The unit commenced commercial production in July 1991, with an initial capacity of 240 tons per annum with pipe size ranging from 20mm to 110mm Outer Diameter (OD), currently the company has a capacity of 12,250 tons per annum and pipe sizes up to 500mm OD. The products include sprinklers, inline drip, drip lateral, screen filters, sand filters, hydro cyclone filters, and fertilizer tanks for irrigation and HDPE Pipes for municipal, industrial and domestic use. The company is setting up another manufacturing unit with the same production capacity at Shadnagar, Hyderabad. Recent results As per provisional FY14 financials, the company reported an operating profit of Rs.13.52 crore on an operating income (OI) of Rs.201.65 crore as compared to an operating income of Rs.14.25crore on an OI of Rs.189.48 crore. September 2014 For further details please contact: Analyst Contacts: Mr. K. Ravichandran, (Tel. No. +91-44-45964301) [email protected] Relationship Contacts: Mr. Jayanta Chatterjee (Tel. No. +91-80-43326401) [email protected] © Copyright, 2014, ICRA Limited. All Rights Reserved. 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